Stocks fall; Dow average pulls back from record

NEW YORK (AP) — Wall Street’s passion for high-dividend stocks is fading.

The stock market closed lower Wednesday, led by the same industry groups that had the biggest gains early in the year: rich dividend payers like power utilities and makers of consumer staples.

Rising bond yields have been an important factor behind that shift.

The yield on the 10-year Treasury note has risen sharply this month and is close to a 13-month high. That’s helping diminish the appeal of so-called “defensive” stocks that the market favored in the first three months of the year. Utilities stocks have slumped 9.2 percent this month.

More broadly, after this year’s powerful bull run — the Dow Jones industrial average is up 16.8 percent, the Standard & Poor’s 500 index 15.6 percent — investors may be running out of reasons to keep plowing money into the stock market.

Investors have been encouraged by positive signs on the economy recently, including sharp increases reported Tuesday in home prices and consumer confidence. Investors worry, however, that the Federal Reserve will start to ease back on its stimulus program as the economy improves.

The powerful run-up in stock prices has been encouraged by the Fed. The central bank has been buying $85 billion of bonds each month in an effort to keep interest rates low and encourage borrowing, lending and investing. With rates low, investors have sought stocks as an alternative to bonds.

Real estate investment trusts, or REITs, another investment favored by investors seeking income, have also been hit as Treasury yields climb. Vanguard’s exchange-traded REIT fund has fallen for five straight days, cutting its gains this year to 10.9 percent from 19.7 percent.

The Dow closed down 106.59 points at 15,302.80, a loss of 0.7 percent. That decline matched its advance the day before, when it closed at a record high, the ninth time it has done so this month. The Dow was down as much as 179 points in late morning trading, then rose moderately in the afternoon.

The S&P 500 index was down 11.70 points to 1,648.36, also 0.7 percent. The Nasdaq composite lost 21.37 points to 3,467.52, or 0.6 percent.

The S&P 500 is headed for a seventh consecutive month of increases, the longest winning streak since 2009. The Dow is on track to end higher for a sixth straight month.